What is a short squeeze? How to trade a short squeeze?What is a short squeeze?
A short squeeze is a short period when the price of a security increase rapidly due to the demand greater than the supply available for that security. A short squeeze is due to short-sellers covering their positions and long traders looking for a bargain.
How to trade a short squeeze?
A common shape of a short squeeze is an "inverted J" shape. The straight-line of the inverted J pattern is due to aggressive buying by the bargain hunters and short sellers covering. The hook shape of the inverted J is formed due to the profit-taking of the short-term traders. A trader can trade in the direction of the "inverted J" shape.
What are some of the reasons one may fail to trade this pattern?
Possibly due to failing to identify a correct bottom before placing a trade. Possibly a temporary bottom was identified, but the downtrend continued and trapped the traders.
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Greenfield
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Disclosure: Chart interpreted and article prepared by Greenfield. A market idea by Greenfield Analysis LLC for educational material only.
